The “abc’s” of Physician Cost Accounting

The need for physician cost accounting data has been prompted by the emergence of capitation and risk-sharing among hospitals and physician group practices. It is no longer sufficient to know the costs of hospital services only: accurate cost data must be developed for the continuum of care. In initiating a costing effort, physician practices can benefit from some of the cost accounting lessons that have been learned by hospitals over the past decade. Although many principles of hospital cost accounting can be applied, there are unique considerations to bear in mind, however, when costing out physician practices. An activity-based costing approach addresses these issues, and is a feasible approach in the physician practice setting.